Correlation Between Walmart and Margo Caribe

Can any of the company-specific risk be diversified away by investing in both Walmart and Margo Caribe at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Walmart and Margo Caribe into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walmart and Margo Caribe, you can compare the effects of market volatilities on Walmart and Margo Caribe and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Walmart with a short position of Margo Caribe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Margo Caribe.

Diversification Opportunities for Walmart and Margo Caribe

-0.83

Correlation Coefficient

Walmart  Margo Caribe

Pay attention - limited upside

The 3 months correlation between Walmart and Margo is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Margo Caribe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Margo Caribe and Walmart is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Walmart are associated (or correlated) with Margo Caribe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Margo Caribe has no effect on the direction of Walmart i.e., Walmart and Margo Caribe go up and down completely randomly.

Pair Corralation between Walmart and Margo Caribe

Considering the 90-day investment horizon Walmart is expected to generate 5.04 times less return on investment than Margo Caribe. But when comparing it to its historical volatility, Walmart is 17.74 times less risky than Margo Caribe. It trades about 0.15 of its potential returns per unit of risk. Margo Caribe is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  600.00  in Margo Caribe on September 19, 2024 and sell it today you would lose (150.00) from holding Margo Caribe or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Walmart  vs.  Margo Caribe

Walmart

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Margo Caribe

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Margo Caribe are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Margo Caribe displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Margo Caribe

The main advantage of trading using opposite Walmart and Margo Caribe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Margo Caribe can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Margo Caribe will offset losses from the drop in Margo Caribe's long position.

The idea behind Walmart and Margo Caribe pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.